Many parents wait until a child is in their mid to late teens to stat teaching them about financial institutions and saving money. We believe that this is a huge mistake – kids are so much more impressionable when they are younger, and introducing them to savings and banks or credit unions at a young age will make them more confident when they start to draw in a serious income when they get older and land part-time jobs; the skills they can learn from their parents at a young age where money-handling is concerned can serve them for a lifetime.
With this in mind, we encourage parents who have children that they would like to educate regarding the importance of saving money to keep in mind the following tips. These are great ways to introduce your child to the sense behind savings in a way where they can understand themselves in a protective trial-and-error environment. Soon, your kid will be saving like a pro!
Give your child an allowance in denominations that encourage savings. If you give your child ten dollars a week in allowance, try giving it to them in ten single bills, or five singles and one five. If you give them a single ten-dollar bill, they’re more likely to go out and spend some money to break it. Smaller bills encourage them to save more money.
Consider opening a checking or a savings account for your child at the bank. Not only will they like having an ATM card just like Mom and Dad, they’ll be able to see firsthand what having a bank account is like. Most bank accounts offer “piggyback” accounts off of a main account, and these are intended for children and preteens. They allow you to monitor how much and where your child is spending his or her money. Remember to allow the child to spend money whenever he or she wants to make a purchase (within reason, of course), as this is where they will learn about how debit cards work. If you forbid your child to touch the money once it’s in the bank account this sets up an unrealistic picture of what a bank account is and will discourage your child from ever putting money into the account.
Help your child differentiate between wants, needs, and wishes. Food, water, and house are needs; video games, toys, and candy are wants; trips to Disney World and a rocket ship to the moon are wishes. While it’s true that children often have a difficult time telling the difference between reality and fiction, working with them on this account can help them begin to understand the difference – at least with regards to spending money.